ACA changes reshuffle the health care premium deck

The influence of federal Affordable Care Act regulations and plans in Massachusetts is reshuffling the deck for employers, leaving many holding losing hands in the health insurance reform game.

Beth Perdue

The influence of federal Affordable Care Act regulations and plans in Massachusetts is reshuffling the deck for employers, leaving many holding losing hands in the health insurance reform game.

As health plans begin renewing in 2014, benefits professionals, attorneys and small business advocates say there have been winners and losers, with health plan rates coming in as much as 10 percent below prior year, to more than 50 percent above.

Julia Jennings saw firsthand how rates are changing during consultations with some of the region's smallest employers for their April 1 renewal dates. Some of these businesses benefited from ACA changes, the vice president of employee benefits for Sylvia Group said, while others lost big.

"We've seen 8 percent decreases in rates to 60 percent increases for small groups," said Jennings. "So it's a huge, huge range and a lot of that is because of rating factors."

Massachusetts rating factors, more expansive than the three or four ACA factors replacing them, are being phased out over a three-year period ending in 2016. Employers will feel the loss, one way or another, this year and possibly again next year, said Jennings.

For example, a former Massachusetts rating factor that adjusts plan costs based on industry factors offered as much as a 10 percent discount or surcharge to businesses. "So if you were getting the 10 percent discount you'll miss it, and if you were being surcharged, you'll benefit from the phase out," said Jennings.

Another factor that will be sorely missed, Jennings said, is a "rate shock bumper" that limited the size of annual premium increases. The bumpers reigned in how much health insurance rates could rise annually, she said, "so basically someone wouldn't be getting a 60 percent rate increase."

Changes to rating factors are designed to make rates independent of health status, according to attorney Kim McCarthy, partner with Patridge Snow and Hahn.

"The idea is that people who are healthier are going to subsidize people who are sicker so that, in general, health care will be more affordable and everybody can get some sort of coverage," she said.

But that goal also means healthier organizations have a greater likelihood of seeing increases due to changes in factors, McCarthy added.

At the National Federation of Independent Business, Massachusetts director Bill Vernon has also been hearing from businesses feeling the pain and the gain of plan costs. His biggest frustration with ACA, he said, comes from having had a workable system in the state that he feels is now less effective through the federal reform plan. Despite cost concerns, Massachusetts had passed good legislation, had achieved 98 percent coverage, and had a working website, Vernon said, adding that there may be future action seeking a waiver from ACA for the state.

Massachusetts has already tried to get a waiver for its rating factors but was only successful in delaying the full implementation for a three-year period, Jennings said.

Rating factors aren't the only change kicking in this year. Other changes include the introduction of the health insurance premium tax, likely about a 1 to 2 percent increase in plan costs, according to Jennings, and a requirement to include pediatric dental plans, approximately a 2 to 5 percent increase.

One form of relief that the federal government has tried to offer has been to allow for higher deductibles, giving employers the option of passing more costs on to employees. Deductible limits for small group employers went from $2,000 to $5,000 recently. While there are pros and cons for such a step, the basic premise is that it gets people invested in health care costs.

"In order to stem the tide of huge health insurance increases each year, you have to get patients with some skin in game," said McCarthy. "So they actually have to think, do I want to spend $5,000 (deductible) on an emergency room visit or can I just wait to go to the doctor's office on Monday."

For some employers, particularly those in the retail and restaurant industries, one of the biggest financial hits may come from the ACA's reduced definition of full-time employment at 30 hours per week.

The requirement not only means employees who work 30 hours or more must be offered health insurance, but also that employers must track the hours of anyone who comes close to the limit on a month-to-month basis.

That's a struggle for home health care groups and other employers who pay on a per diem basis who are struggling to find ways to track hours and stay under the 30-hour trigger, Jennings said.

"I think that 30 hours is really, really tough for employers," she said. "I keep hearing stories about retailers cutting back hours of people so they don't have to provide insurance for them. It's horrible."

To avoid the administrative nightmare of month-to-month tracking, some businesses are setting limits on the number of hours that can be worked in a week, say 28 hours, McCarthy said.

"What they don't want is the uncertainty where somebody could month-to-month become eligible for coverage," said McCarthy. "So they are trying to draw bright line rules (such as the 28-hour per week maximum) that make that less likely."

Legislative relief may be in the works. In April, the House of Representatives passed the Save American Workers Act of 2014 to redefine full-time at 40 hours.

A similar bipartisan bill is in the Senate, according to Kevin Kulhman, NFIB manager of federal public policy, who said he is hopeful it will be taken up this year.

"It would provide some relief for employers from increased compliance costs and penalty costs and for employees, it would prevent any reduction in hours below 30 and provide flexibility," said Kulhman.

But many in the industry aren't confident the bill will pass and even if it does, it won't happen before fall, they say. McCarthy believes in may be even longer.

"Nothing's going to be done before the presidential election in my view," she said. "Something like that might work in the future, I think, after the election and when we get closer to rollout."